Decentralized oracle project Tellor (TRB) experienced a threefold surge in price on January 1st, followed by a more than 75% drop, causing many retail investors to suffer losses on the first day of the new year. How did the market manipulators behind this control the situation?
Overview:
TRB is a coin controlled by market manipulators.
To identify such coins, it is best to analyze on-chain data because market manipulators do not hold large amounts of coins on exchanges; they must be on-chain.
On December 29th, Spot on Chain tweeted that about 95% of TRB is in the hands of market manipulators, held by 20 whale addresses. This concentration of chips is significant.
Compared to Bitcoin’s supply of 21 million coins, TRB’s total supply is only 1.95 million coins. Considering this, a price increase to $1,000 or even $500 is not unreasonable.
However, simply knowing that TRB is a coin controlled by market manipulators is not enough. The key is to understand how the manipulators will operate, whether they will manipulate the market or dump their holdings. It entirely depends on the manipulators’ intentions, which is difficult to predict.
Therefore, we need to use another tool to analyze market sentiment.
Market sentiment analysis:
Here, I will provide three indicators: 1) Holdings, 2) LSUR (Long to Short Ratio), and 3) Funding Rate.
How to analyze holdings:
Before the explosive rise, the trend of holdings was as follows:
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Price and holdings were rising together, indicating that large funds were going long.
To distinguish whether it was manipulators or retail investors going long, we need to combine it with the second indicator, LSUR.
LSUR is a very practical indicator. LSUR > 1 indicates retail investors going long, while LSUR < 1 indicates retail investors going short.
The chart below shows that during TRB's rise, LSUR also increased, indicating that retail investors were going long.
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What would you, as a manipulator, do in this situation?
That's right, you would wash out the positions, and the extent of the washout depends on your conscience!
Then, the first classic scene occurred last night, with a rapid 30% drop within minutes.
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This washout was extremely brutal. A 30% drop corresponds to a 3x leverage, meaning that even if you went long with 3x leverage, you would still suffer losses.
Why 3x leverage? It was because a long time ago, the default leverage on OKCoin was 3x, and later everyone used 3x leverage for arbitrage, which felt safe.
After the manipulators finished washing out the positions, how many positions were liquidated? You can see from the decrease in holdings, which is estimated to be around $30 million.
After TRB experienced a significant 30% drop, what happened?
Yes, it was widely reported by major media outlets that TRB had plummeted 30%. This sudden drop garnered a lot of attention from the media, which means that TRB came into the spotlight. Previously, many people might not have paid attention to or even known about TRB, but this publicity made many users aware of it, and then trading activity began.
It is important to note that trader attention is a crucial aspect because without popularity, it is difficult to sell even when the price rises. Once popularity increases, the next phase of operations can begin.
LSUR is still the indicator we use here. Why? Because this indicator is really useful and accurately determines the overall sentiment of manipulators and retail investors.
Manipulators and retail investors are opposites; when retail investors increase, manipulators can eat well. We can see how retail investors view TRB.
After TRB's sharp decline, everyone believed it would rebound, so they went long. After the drop last night, retail investors began obvious buying behavior, driven by the significant increase in LSUR.
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Our analysis aligns with the LSUR data, indicating that TRB is expected to rise.
What's next?
This is where we need to use our main force indicator!
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$250 is a critical point because the large order data shows that after surpassing this level, the main force continues to place many buy orders below the current price.
Why operate in this manner?
To attract market-making bots or high-frequency bots that rely on OBI (order book imbalance) trading strategies to actively buy and push the price up. By continuously using large buy orders, they drive market-making bots to buy at the market price, pushing the price higher. This was the classic operation last night.
At 11 PM last night, after the TRB price returned to its original level, what happened?
The price consolidated, holdings decreased, and LSUR decreased. What does this mean?
It means that everyone thought TRB had reached its peak and stopped going long on TRB. Therefore, liquidation and selling off of positions began, resulting in a decrease in holdings and retail investors starting to go short, leading to a decrease in LSUR.
After TRB reached around $290 last night, it consolidated for a long time. At this point, we would naturally assume that the previous high is a resistance level. So, a series of data indicates that retail investors do not have confidence in TRB. If the price were to rise, retail investors would still firmly short.
At this point, the mindset of manipulators and retail investors has clearly changed: manipulators are bullish, while retail investors are bearish. The hunting moment begins!
Furthermore, it was already late at night, and it was New Year's Day. Everyone inevitably had to spend time with their families, celebrate the New Year, and go to sleep. This is why the explosive rise occurred in the early morning and ended in the morning, as it targeted the users in the GMT+8 time zone.
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This image is classic, with large buy orders supporting the price and LSUR continuously decreasing.
Why doesn't the price drop?
Because when manipulators feel that you want to buy, they will buy in advance and wait for you to raise the buying price before selling to you.
From $250 to $464, an 80% increase, how much capital do you think the manipulators used?
The answer is $40 million! Through $40 million worth of large orders, they achieved the feat of pushing the price from $250 to $464. The subsequent rise was actually top-level selling. The main uptrend was from $250 to $464, and during this phase, the manipulators only used around $40 million in capital.
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Manipulators control the market through the cycle of accumulation, washing out, pulling up, placing large orders, and dumping. The pulling up phase has now ended, and the selling phase has begun. In the selling phase, the best strategy is to raise the price!
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I have drawn a simple pattern. After the manipulators finished pulling up, they began their selling phase. After consolidation, there was a sudden surge, attracting technical analysis traders to buy and then quickly dropping to trigger stop losses. This drop near $464 was an obvious selling point. At this point, a deep pullback would attract retail investors to buy again, continuously pushing up the price. However, because the manipulators were continuously selling, the price rose slowly and couldn't break the previous high.
But it is important to note that in many cases, the second peak in the cryptocurrency market will surpass the previous high, triggering stop losses for short positions, and then it will decline. So, during this rise, manipulators showed some kindness; otherwise, they would have broken the previous high, triggered stop losses, and then plummeted, leaving you in tears.
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Kindness exists, but not much, as they caused a 70% drop! This drop was beyond the expectations of 99% of people.
Why can they operate like this? Because this is a coin controlled by capital, not fundamentals or technical analysis.
During the decline, how did retail investors operate?
Let's go back to the analysis of LSUR and holdings. Retail investors like to buy low and hold positions, so during the decline, holdings increased, and LSUR increased, indicating that retail investors were buying more.
Also, take note of the highest price of $555; it has a sense of humor. (It can be understood as a kind of market language; "555" means crying. It means that the manipulators want to sell and make you cry. This situation also occurred with BTCUSDT perpetual on OKEX, where the price was $44,444.)
At this point, we need to mention the explosive funding rate!
Last night, Binance settled funding every 4 hours, and TRB's funding rate had an upper and lower limit of ±2%. A funding rate of -2% every 4 hours was very tempting.
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A funding rate of -2% means that most people in the contract market are shorting TRB and selling it, causing TRB's price to be lower than the spot price.
Retail investors were shorting, so the main force was undoubtedly going long, which was also reflected in the LSUR data. So, this judgment was corroborated by multiple data sources.
But generally, traders who trade one-sidedly do not pay much attention to the funding rate. So, who does care about the funding rate?
That's right, arbitrage traders!
What arbitrage opportunities arose last night? The TRB funding rate was negative, making it possible to do reverse arbitrage. However, reverse arbitrage requires having coins, and manipulators usually borrow all the coins in advance to prevent interference with their operations. Therefore, reverse arbitrage is generally not feasible. Instead, arbitrage traders typically use dual-contract arbitrage.
Applied to TRB, it means going long on the Binance TRB/USDT contract and shorting on the OKEX TRB/USDT contract.
Why do it this way? It's to take advantage of the funding rate settled every 4 hours:
Binance funding rate: -2% (settled every 4 hours) = -8%
OKEX funding rate: -1.5% (settled every 8 hours) = -1.5%
Let's calculate the profit: 8-hour profit is 6.5%. Since it is arbitrage and involves both long and short positions, it should be relatively safe. So, most arbitrage traders saw this trading opportunity and went to do arbitrage.
But arbitrage also carries risks, especially cross-exchange arbitrage. The core risk lies in exchanges suspending withdrawals, causing the price difference between the two exchanges to be uncontrolled. Another risk is that if one side rises too sharply and triggers liquidations, it becomes a one-sided trade. If one quickly closes positions after triggering liquidations, the losses won't be significant. However, if one holds the one-sided position after triggering liquidations, it will result in a one-sided risk.
And that's why we saw the price of over $700 on OKEX because the depth on OKEX is shallow, and arbitrage traders had short positions on OKEX. This led to a chain reaction of short liquidations and ultimately caused the price on OKEX to be much higher than on Binance.
Of course, there is also arbitrage that takes advantage of price differences, which can be very profitable if done well.
Arbitrage is an important participant in the market, but poor risk management can lead to significant problems. However, TRB last night was a nightmare for arbitrage traders, as many people were liquidated. So, when trading, it is essential to pay attention to risk control, set strict stop-loss levels, and avoid turning small losses into disasters. At the same time, if you could combine trading with main force order flow and manipulators, the gains would be very rewarding.
Now, TRB has completed the distribution and dumping process. Because there were many liquidations during this round, it is not expected to see a new trend in the short term. Even if there is a new trend, it will require another round of accumulation and washout.
The review of this bloodbath market for TRB has basically ended. To summarize, in order to make money during this wave, we need to fully utilize the following methods:
Identify coins controlled by manipulators.
Identify abnormal funding rates, LSUR, and holdings.
Combine main force order flow (or large-volume transactions) for main force capital analysis.
Set strict stop-loss levels.
Combining main force order flow is the best choice to grasp the manipulators' capital control. Whether buying or selling, it should ultimately be reflected in the order book. As long as there are orders and transactions, we can monitor them. Therefore, everyone must make good use of these methods!
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Related reports:
Opinion: Was TRB's explosive rise and fall due to market manipulators?
TRB soared to $629 before plummeting 80%, causing $60 million in liquidations.
TRB has an extremely high negative funding rate: Will it continue to surge or collapse?